Wisconsin falling short in revitalizing waterfronts

Jun. 6, 2013

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Gannett Wisconsin Media Investigative Team

An area near North Fond du Lac. / Dan Young/Gannett Wisconsin Media

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In 2005, dozens of Wisconsin officials gathered at a new resort on Lake Michigan. Sheboygan’s Blue Harbor Resort was a case study for revitalizing Wisconsin’s waterfronts, representing millions of dollars in private investment and the promise of jobs and tourism dollars.

Eight years later, Wisconsin hasn’t come up with a blueprint for making that happen.That lack of success continues to symbolize a lost opportunity for many Wisconsin communities with empty or abandoned waterfront land, including former sites of heavy manufacturing or industry.

“In a state looking for job creation and that’s concerned about how you bring business here, the one thing you can never lose is the water,” said Art Harrington, a Milwaukee attorney who has worked on waterfront development. “That is the value of figuring out how to do this.”

Though federal and Wisconsin experts onland development began arguing a decade ago that rehabilitating waterfronts is key to both the state and local economy, multiple efforts to increase some communities’ odds of succeeding have fallen short.

So while Milwaukee’s downtown riverfront is often hailed as a model for taking industrial waterfront from eyesore to attraction, North Fond du Lac officials nixed a resort project on the western shore of Lake Winnebago. And while Oshkosh celebrated the re-opening of a renovated waterfront hotel this spring, a hotel-condominium project proposed in 2005 on Lake Winnebago was delayed and ultimately died.

In both cases, local officials fault the economy and timing. But there was also confusion and conflict between state and local authorities that helped derail the lakefront projects.

A group of state agencies and stakeholders now are putting together a statewide team to coach local officials through planning and executing waterfront work. The group likely would tackle one project as a test case and hope to have at least a website put together within a few months.

Standing alone

Some city officials are beginning to wonder whether waterfront areas will draw new construction without accompanying taxpayer help. Giving help to developers who take a risk on waterfront areas makes sense, Green Bay economic development director Greg Flisram said.

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But at some point, the city has to attract new construction without handing out tax incentives, Flisram said.

“Our thinking is that the first people in deserve to get the biggest incentive or subsidies and that Johnny-come-latelies don’t deserve the same level of support,” he said. “Whether we ever get there remains to be seen. The first thing people ask for is what kind of city subsidy is on the table.”

But developers and other experts argue that cities should offer financial incentives, handle all or most of environmental cleanups or sell land at cheap rates — options that can make mayors and local officials elected to short terms uneasy.

Waterfronts are too important to the communities’ futures and need help competing against suburban land that doesn’t have pollution and ownership squabbles attached, said Robert Monnat, chief operating officer of Milwaukee developer the Mandel Group, which has done a series of waterfront apartments and other projects.

“There has to be some recognition that the city may have to go an extra mile in terms of financial participation,” Monnat said.

Cost ultimately is the deciding factor, several developers who specialize in waterfront redevelopment said in recent interviews. John Vetter’s firm, Vetter Denk, has completed waterfront apartments and offices in Green Bay and Milwaukee is planning five apartment buildings at the site of a former dairy factory on Appleton’s riverfront.

Vetter said developers may be able to charge a bit more in rent to cover higher construction costs along waterfronts, but going too high means you won’t have tenants.

In Green Bay, for example, Vetter said renters are likely to pay between $1.10 and $1.25 per square foot. In Madison and Milwaukee, that increases to between $1.50 and $2 per square foot depending on the area, he said.

“End of the day, your rents in a waterfront building and another are the same,” Vetter said. “But you have extraordinary costs building on the water. You have to get the assistance.”

And that means cities, especially those with waterfront renters who will pay lower rent per square foot, generally are expected to provide some sort of financial break or otherwise risk losing a project, according to Appleton’s community and economic development director Karen Harkness.

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“You’re probably going to be encountering brownfield sites, and you’re talking a lot of expense,” Harkness said. “The project probably is not viable for a developer unless the community is willing to support that through (tax increment financing) or some other means.”

Barry Hersh, a professor at New York University’s Institute of Real Estate, studied urban waterfront redevelopment projects last year in five states: Connecticut, New Jersey, Ohio, Oregon and Pennsylvania. He found that projects financed solely by developers were unlikely to make it past the idea phase,but he doesn’t believe “throwing money” at waterfronts is the only resource available for local and state government.

States and cities can figure out which federal grants work for waterfront land, acquire properties and handle cleanup costs, in addition to tax incentives, he said.

“There have been plenty of success stories in (waterfront redevelopment),” Hersh said. “That doesn’t make them easy. But seeing it can be done inspires other people.”

What's the challenge?

As demand for waterfront views and a “walkable lifestyle” close to shops and restaurants boomed in the late 1990s and early 2000s, condominium construction and easy-to-get financing loans encouraged private developers to build near rivers and lakes anyway.

Demand and construction slowed dramatically as the 2008 recession began. But more waterfront property opened up as major industrial and manufacturing companies shut down, downsized or moved away. Cities were left to figure out how to fill those spaces, but few private developers were willing to take the financial chance.

“These projects, to be successful, they take time,” Harrington said. “You have to figure out politically how you can start spending resources when the benefit may not come within the term of the decision-maker.”

Political challenges aren’t the only barriers to waterfront work. The projects typically require approval from multiple layers of government, including the city, several state agencies, any groups providing grant money and the federal Army Corps of Engineers or Environmental Protection Agency.

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Proximity to the water also draws unexpected groups into that process. Monnat said he’ll never forget listening to a group of tugboat captains speak at a public hearing on a proposed marina. They were worried barges accidentally could get away from tugboats and be pulled into the marina, causing damage.

“If you’re doing a project just a block off the lake or river, you won’t even have to think about these things,” Monnat said.

Major waterfront projects also inspire neighbors to ask questions and get involved. In Sheboygan, a group of residents formed Citizens for a Strong Sheboygan in 2012 as the owners of the Blue Harbor Resort were considering building a casino on Lake Michigan. The plan ultimately collapsed.

James Michel, who was the executive director of the group, said he’s still waiting for the city of Sheboygan to take a proactive approach to the area surrounding the resort, nicknamed the South Pier District. After the hotel opened in 2004, Michel said local officials took a “build it, and they will come” approach.

“We’ve learned it’s a great movie line, but not a great economic development strategy,” he said. “A hotel alone is not a tourist attraction, and it clearly needs more support.”

Chad Pelishek, the city’s director of planning and development, said he and other officials know they can’t depend solely on tourism to support that portion of the city but still hope to connect the area to the water. Sheboygan’s master plan for that area still calls for retail, commercial and some housing.

“Did we envision a recession? No, we did not,” Steve Sokolowski, the city’s manager of planning and zoning said. “But the fact of the matter is we’ve opened up a space that’s a jewel on the lake and riverfront that at one time was utilized but then was just sitting there. How could you not take advantage of that?”

A potential solution?

State officials and stakeholders said in recent interviews that they are frustrated with the uneven pace of waterfront work, and hope that developing a blueprint for communities to follow will even out that progress statewide.

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But they’re moving slowly, said Department of Natural Resources’ brownfields section chief Darsi Foss, because previous efforts have failed. State lawmakers introduced a bill in 2003 to create a state waterfront development program run by the Department of Tourism, but it failed to pass.

Two years later, prompted by a series of roundtables run by the Environmental Protection Agency on Great Lakes quality, the conference in Sheboygan raised the issue again. But everyone left without a statewide plan to improve Wisconsin’s waterfronts, Foss said.

“Everybody, right now, is on their own,” Foss said.

No one seems certain exactly what the working group or waterfront initiative still being discussed will look like, but Foss is hoping for a “first-stop shop” approach. Communities should be able to make one phone call to get information about where to get funding, which agencies to contact and other suggestions for their waterfronts, she said.

Helen Sarakinos, policy and advocacy director for the Wisconsin River Alliance, said that would be a good start. Sarakinos said she doesn’t see a magic formula for every community because each project is unique.

“It would be really lovely to say if you move this, this, this and this, the city would be well positioned to develop,” she said. “But it is pretty clear that there (needs) to be a really solid relationship between the business community, city administration, and a group championing why this is needed.”

Steve Hiniker, who used to work for the city of Milwaukee’s planning department before becoming executive director of the advocacy group 1,000 Friends of Wisconsin, remembers watching a bloated deer carcass float through downtown on the Milwaukee River during the spring of 1993. That was before the condos, restaurants and small retail shops that dominate Milwaukee’s Riverwalk now replaced its industrial past, he said.

“I thought, ‘Once the Riverwalk’s developed, no one’s going to put up with the (pollution),’ ” Hiniker said. “When we developed, most people put their backs to the river. Now we’re turning to it.”